From 1 April 2026, a significant change to VAT relief on business donations to charities will take effect, providing a welcome update for both UK businesses and the charitable sector.
This change, confirmed by HMRC following a consultation, extends VAT relief to donated goods that are used by charities or donated onward, not just those intended for resale.
Currently, businesses are able to use a zero-rate VAT relief on the donation of goods to a charity or its trading subsidiary, as long as the items are intended for sale.
From 1 April 2026, businesses will no longer have to account for VAT on goods donated to a charity, to be used for onward distribution to people in need.
This change is part of the Government’s drive to promote charitable giving, reduce waste and support the wider goal of a circular economy.
The aim is to simplify the donation process and encourage more surplus goods to be put to good use instead of being wasted.
The relief applies to businesses that donate goods to registered charities, including those that donate to charities for use in their non-business activities or for onward distribution.
It is understood that the VAT relief will be available for items valued up to £100 per item, with a higher limit of £200 for essential goods like mobile phones, laptops, furniture and white goods.
This increase in value limits aims to help tackle digital poverty by ensuring that vital technology can be distributed to those who need it.
However, some exclusions apply.
Additionally, the relief will only apply to registered charities. Profit-distributing entities, like community interest companies (CICs) and social enterprises, will not be eligible unless they are also registered as charities.
Businesses that regularly donate goods to charities should start preparing for the changes ahead.
To benefit from the VAT relief, businesses will need to keep accurate records of the donated goods, including their value and proof of delivery.
Charities can expect an increase in the volume of donations, particularly from businesses, thanks to the new VAT relief.
However, charities will need to be prepared for requests from businesses for certification of their charity status. This may require charities to provide documentation confirming their eligibility, but no additional record-keeping obligations are anticipated.
We advise UK businesses and charities on VAT compliance, charitable reliefs and upcoming HMRC changes. Our specialist team can help you understand how the new rules apply, ensure your records are robust, and support you in preparing ahead of April 2026.
If you need advice on VAT relief for charitable donations or wider charity VAT matters, please get in touch with Partner, Jas Dhillon (jaspaldhillon@lubbockfine.co.uk) or Director, Sharon Parker (sharonparker@lubbockfine.co.uk).
